Dive Brief:
- Quest owner Simply Good Foods is facing a class action lawsuit from investors who claim the company failed to properly integrate its $280 million purchase of Owyn protein shakes and that a reformulation led to a decline in sales.
- The lawsuit, filed in the U.S. District Court for the Southern District of New York, says Simply Good Foods switched to “an inferior supplier of pea protein,” impacting taste and ultimately sales of the plant-based protein shake brand.
- Since purchasing Owyn in 2024, Simply Good Foods’ stock price has plummeted 70% and the company has taken a cumulative $200 million impairment on brand assets, the lawsuit said. Investors are asking a judge to grant compensation for “substantial financial losses and economic damages.”
Dive Insight:
Simply Good Foods has struggled with a significant slowdown as dozens of new protein shakes and bars on the market siphon sales from the company’s flagship Quest. The addition of Owyn, which stands for Only What You Need, was meant to diversify the company’s offerings and expand its presence in the growing ready-to-drink protein shake segment.
In the lawsuit, however, investors claim that Simply Good Foods’ integration of Owyn has “been an abject failure.” The addition of a new pea protein supplier for Owyn formulations, a decision made prior to the acquisition but executed shortly thereafter, created “significant product quality issues” including negative impacts to taste, texture and shelf life.
Those changes led to negative reviews, depressed sales and the loss of distributor relationships, the lawsuit claimed.
Simply Good Foods CEO Joe Scalzo, who returned to the company earlier this year to oversee a turnaround, said in July that it has addressed the product issue but still expects distribution losses over the next six to 12 months “because of poor marketplace performance.”
Scalzo still believes that there are opportunities to grow Owyn, saying “it’s becoming increasingly clear to me that our challenges are largely execution-driven rather than category-driven.”
The company plans to complete a distribution reset and refocus Owyn’s growth on its core ready-to-drink and powder business, saying there is consumer demand for functional nutrition products featuring plant-based protein and clean label ingredients.
“Our confidence in OWYN is based on the underlying consumer proposition, not on recent execution,” Scalzo said. “We believe the challenges we are addressing stem primarily from integration and execution issues rather than a lack of consumer demand for clean label plant-based nutrition.”
